Find Deviant Behaviors, Find Fraud?

Human Resources Issues Could Uncover Worse Crimes

March/April 2012

By Ryan C. Hubbs, CFE, CIA, PHR, CCSA

Sophisticated fraudsters may be able to conceal their frauds, but they may not be as adept in hiding their workplace deviant behaviors. Identifying or recognizing a correlation between the two, even if the correlation is weak, could significantly improve the anti-fraud profession's ability to uncover fraud.

On his first day on the job, Joe started viewing "adult" movies on his company computer and paying for them on his company-issued credit card. He continued this behavior during his six years with the nonprofit and racked up more than $4,000 in inappropriate charges. But that wasn't all. After Joe resigned, an audit of cash collections showed Joe took more than an additional $50,000 in donations. Another audit of the cash disbursement account also revealed Joe was writing checks payable to "cash," and personal checks written from this account totaled more than $28,000. In the end, Joe's frauds totaled more than $82,000. The company prosecuted Joe, and he received probation.

Throughout my career, when investigating fraud complaints, I would find that suspects often also would have problems with pornography, bullying, harassment and other human resources issues. Conversely, when I would be called in to investigate human resource complaints and issues, I occasionally would find one or more fraud schemes involving these individuals.

Over the years, I found so many instances of pornography on suspects' computers when investigating fraud complaints that I would jokingly comment that all investigations seem to lead to porn. After fellow fraud examiners shared similar stories at last year's ACFE Annual Fraud Conference and Exhibition, I decided to do some research.

A daily search of news articles in any country will yield dozens of examples and situations that are very similar to the one mentioned above: employees engaging in workplace deviant behaviors while also defrauding their employer. Is there any link, association or correlation between non-fraudulent deviant behavior in the workplace and fraud? Can we find fraud then by looking for deviant behaviors and working our way backwards to potential fraudsters? I wanted to know if anybody had researched this possible correlation.

I began to form the "Using the Deviant Behaviors of Others to Find Fraud" hypothesis or UDBOFF. (I've already received feedback that I should have come up with a catchy acronym first, then do the research, but we are too late for that, so UDBOFF it is.)

I conducted a three-month review of articles to look for other documented incidents in which workplace deviant behaviors and fraud were linked in the same cases and to explore whether I could expand and refine this approach so it could become a useful tool in the fight against fraud. Sophisticated fraudsters may be able to conceal their crimes, but they may not be as adept in hiding their workplace deviant behaviors. Identifying or recognizing a correlation between the two, even if the correlation is weak, could significantly improve the anti-fraud profession's ability to uncover fraud.

First, a definition that I work with: workplace deviant behaviors are those behaviors exhibited by people at work that violate company policies, laws and socially accepted workplace behavior. Examples may include: sexual harassment, sending or viewing inappropriate images, bullying or intimidating other employees, using directed profanity at others, conducting intra-office affairs or retaliating against another employee. Part of the UDBOFF hypothesis is based on the premise that if someone is willing to violate the sexual harassment policy, they may also have little regard for the financial policies of the organization. Therefore, finding the next fraudster could be as simple as looking for individuals who exhibit these deviant behaviors in the workplace.